Group-based Licence Renewals for English-language Television groups

[CRTC
2010-952]

Mr. Chair and Commission Members: thanks for offering Friends of Canadian Broadcasting an opportunity to comment – and to provide the Commission with a viewers’ and listeners’ perspective on the issues before you in this public hearing. As you know, Friends is an independent watchdog for Canadian programming in the audio-visual system, supported by 150,000 Canadians. We completely endorse the comments of the preceding presenter, the Communications, Energy & Paperworkers Union.

We note that many of the Commission’s proposals intended to increase flexibility for station groups were first advanced at a time when the recession depressed the most recent financial information available to the Commission – the 2009 broadcasting year – data which called into question the viability of English-language private conventional television.

We also note that the Commission’s proposals predate the recent upheaval in the ownership structure of English-language station groups. The financial resources of the station groups should now be considered in the context of the financial capacity of the vertically-integrated companies of which they have become a part.

Just as the BDUs used to insist that the financial capacity of conventional television should be seen in the context of the overall profitability of their respective station groups and therefore include both over-the-air and specialty channels – a point of view that appears to have influenced your Commission’s thinking towards the re-structuring of the licensing process – so the financial capacity of the newly acquired station groups needs to be considered in the wider context of their new ownership structures, including other lines of business such as home phone and Internet. As in many companies, some parts of the overall business cross-subsidize other parts – a cost of doing business. In this proceeding, we therefore urge the Commission to consider the capacity of the whole business.

We also recommend that the Commission exercise great caution going forward when considering proposals to change the nature of service or programming categories of specialty channels to ensure that they do not lead to a reduction of their ‘specialization’ – their unique program offerings – as elements in the diversity of the Canadian audio-visual system built up over several decades through successive decisions of your Commission.

In recent years, spending on Canadian programming by the English-language private conventional television groups has fluctuated around 30% of revenues:

Friends has reviewed the Canadian programming expenditures
of the specialty and pay services of the four station groups based on publicly-available information and compared this total to the level proposed under the Canadian Programming Expenditure (or CPE) regime. This research suggests that implementing the proposed regime would result in a reduction of approximately $90 million annually in Canadian program spending by the four groups taken together – 51% of this reduction coming from CTV and 46% from Shaw Media:

We appended to our February 9 submission detailed information for each of the station groups, from which the above summary is derived. In view of responding comments filed by Corus, we reviewed these charts and identified an error on our part, which overstated Corus’s Canadian Programming Expenditures on YTV by $10 million. Although we do not consider that this error is material to our argument, we will share with you today revised charts up-dating the Corus and summary data presented on page 6 of our February 9 submission.

Your proposed funding requirement for Programs of National Interest (PNI) features a requirement for 5% of total revenues in the preceding year to be devoted to a combination of drama (Category 7) and long-form documentary (2[d]). The following chart shows that Category 7 spending averaged 6.4% of the preceding year’s revenue in 2009. While the Commission’s published data do not permit identification of spending on sub-Category 2[d], these data indicate that the proposed PNI requirement would reduce combined Category 7 plus 2[d] spending by in excess of $70 million per annum:

Achieving a new regime without depressing Canadian Programming Expenditures will require a 32% CPE:

As I mentioned, achieving a Programs of National Interest regime without depressing Category 7 programming expenditures would require at least a 6.4% PNI, plus an amount that the Commission could determine based on Category 2[d] expenditures – a statistic which you do not release publicly:

CTV has argued that the end of analog preference packaging could adversely affect analog revenues.1 Friends doubts that BDUs which control this packaging would engage in practices that would negatively affect their own services’ revenues.

CTV’s application also states that “the Commission can no longer expect the larger, more profitable undertakings of a particular corporate group to subsidize the less profitable assets”. .2

Why not?

Despite the Commission’s significant effort to extend flexibility, each applicant has put its hand out in an Oliver Twist-like request: “Please, Sir, I want some more” – asking for a variety of exceptions. One has proposed an exception to the CPE regime for Category B services – a lower 15% CPE. Another has proposed relief from the requirement to spend 75% of PNI with independent producers. Friends recommends that the Commission make no exceptions.

Finally, a few comments regarding digital transition. Recent CMRI data indicate that 29% of Canadian households operate at least one analog television set which receives over-the-air signals. Three million Canadians rely on analog over-the air signals for their connection to the audio-visual system. Most of them have low incomes and are senior citizens.

The isolation they will face with anger on September 1, 2011 will have political ramifications, particularly when they find out that the vacated frequencies that deprive them of their television experience have generated in excess of $4 billion in windfall revenue to the Government of Canada. Yet our government, unlike its American counterpart, has financed no program to subsidize their continued access to television signals they require to stay connected in their communities – and to participate as citizens in this country’s affairs. These people vote!

Since the Commission has adopted a digital plan, it is vital that all broadcasters adhere to it – including the CBC, which, as you know, attempted to subvert the plan in its application for a digital transmitter for CBAT in New Brunswick. However, we do note that most of the station groups seem to be on schedule to meet the Commission’s August 31, 2011 deadline.

They should be strongly encouraged to adhere to the Commission’s deadline in mandatory markets and should be required to install transmitters in other smaller markets rather than use the digital transition as an occasion to drive customers to Bell TV or Shaw Direct – a direct conflict between their commercial interests and the public interest.